Kuwait Supply Cut: Kuwait’s massive supply decrease has made the Asian crude oil market difficult for refiners. Kuwait, a major OPEC member and oil producer, has restricted its exports by a fifth to fund its massive new plant. This decision allowed resources to fuel the massive new refinery. This intentional initiative to enhance local refinery capacity affected the global oil market. Due to this, the prices of other sour crudes have skyrocketed, which may have hurt refineries.
Saudi Arabia, an OPEC powerhouse, took similar moves to reduce Kuwaiti imports. Production constraints in Saudi Arabia have driven Brent prices to nearly $90 per barrel. Since Saudi Arabia took these moves, Kuwait’s exports have dropped.
Asian refiners, which acquire more than two-thirds of their crude oil from the Middle East, have had little room to move due to restricted supplies. Chinese refiners are especially vulnerable since they invested heavily in substandard oil processing infrastructure. Facilities remove sulfur from crude oil using chemical and physical processes.
China and India have benefited most from cheap Russian oil replacing Kuwaiti oil. However, most of Kuwait’s clients will likely have to turn to Saudi Arabia, Iraq, and the UAE. They may even choose more expensive savory varieties from other countries.
Saudi Arabia and the UAE can manufacture and ship medium sour barrels, filling the Middle East supply gap. This is because Saudi Arabia and the UAE can. You should consider this alternative. Analyst Janiv Shah of Rystad Energy says the task is hard and they won’t be able to meet all of the increased demand for their services.
A supply constraint that lasts until 2024 may be caused by OPEC and its partners’ output restrictions, newly built refineries that can process sour oil, and other factors. Energy Aspects specialist Sun Jianan supports this prognosis. The fact that there are many unknowns illustrates how intricate the matter is. Shows how intricate things are.
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Kuwait sold 1.61 million barrels of oil per day (bpd) in the first seven months of 2023. This is a substantial decline from last year’s 1.73 million bpd exports. After a pause in recent months, the Al Zour refinery began generating oil again, causing this reduction. The number of items shipped to numerous countries declined significantly during this time. China, Taiwan, and India saw the highest export reductions.
Kuwait is anticipated to drop exports by 300,000 barrels per day in the second half of the year. This is an 18% drop from the first half of the year. Resources were relocated to Al Zour, which started its third and final crude distillation unit in July, enabling this change. This adjustment was achieved because Al Zour building resources were shifted. Professional reviews from FGE, Energy Aspects, Rystad Energy, and S&P Global Commodity Insights had comparable outcomes. This supports this view.
The Kuwaiti and Omani refinery at Duqm, Oman, will begin operations in 2023 as a joint venture. This would make matters worse. Many expert studies predict that Kuwait will have to limit its oil exports by 100,000 to 200,000 barrels per day in 2024.
The fact that Kuwait Petroleum Corporation (KPC) has informed customers of volume fluctuations indicates how fluid the issue is. As the Al Zour refinery nears full capacity, the numbers may be trimmed further. At the time of writing, Reuters had repeatedly requested a statement from KPC, but the company had not responded.
Our Reader’s Queries
How much oil does Kuwait have left?
Kuwait boasts an impressive oil reserve that is equivalent to 774.6 times its annual consumption. This translates to a whopping 775 years of oil left, without factoring in net exports and unproven reserves. It’s safe to say that Kuwait’s oil industry is in good hands for the foreseeable future.
What countries are cutting oil production?
Along with Saudi Arabia, OPEC+ has announced voluntary production cuts from other countries as well. Russia will cut down by 500,000 barrels per day, Iraq by 223,000, the United Emirates by 163,000, Kuwait by 135,000, Kazakhstan by 82,000, Algeria by 51,000 and Oman by 42,000.
Where does Kuwait export oil to?
Kuwait’s Crude Petroleum exports have found their way to various countries, with China being the top destination, followed by South Korea, India, Japan, and Vietnam. These countries have imported Crude Petroleum worth billions of dollars from Kuwait, indicating the significant role played by the country in the global oil market.
Is Kuwait increasing oil production?
KPC has set a target to boost its oil production capacity to 4 million barrels per day (mbpd) by 2035. Presently, Kuwait’s production capacity stands at 2.9mbpd and is anticipated to reach 3.2mbpd by 2025 or 2026.